TAMPA, Fla. (WFLA) — As hurricane season approaches, it’s not an understatement to say that water is heading to Florida. However, in addition to the rain and storms coming to the Sunshine State, residents are also likely to see higher flood insurance costs in 2022.

Florida has 8,436 miles of coastline, according to the National Oceanic and Atmospheric Administration, the second highest number of shore miles in the U.S. by distance.

While part of that is due to a new system from the Federal Emergency Management Association making changes to how costs are calculated, the rise in costs is also due to the hot housing market. Property values affect National Flood Insurance Program rates.

“Higher-value properties tend to make larger claims to NFIP than lower-value properties,” according to the National Association of Realtors. “This is what is known in the insurance industry as the ‘insurance to value’ effect, which is why the private insurance market also accounts for replacement cost values in their rate quotes for standard home insurance policies.”

Still, it’s true that Risk Rating 2.0, which started officially last year, will cause some insurance coverages to rise. It was the first update to the rating system in a half-century.

The new pricing program changes how flood insurance is calculated, pricing premiums on an individual property’s flood risk, rather than basing premium rates on a flood zone location. According to FEMA, the new rating system should make pricing “more equitable.”

“The new pricing methodology is the right thing to do. It mitigates risk, delivers equitable rates and advances the Agency’s goal to reduce suffering after flooding disasters,” David Maurstad, senior executive of FEMA’s National Flood Insurance Program, said on April 1. “Equity in Action is the generational change we need to spur action now in the face of changing climate conditions, build individual and community resilience, and deliver on the Biden Administration’s priority of providing equitable programs for all.”

However, real estate company Redfin reported that almost 3 million homeowners are going to face higher costs as a result of the NFIP pricing overhaul. Roughly 90% of homeowners or policyholders in just three states will see prices go up to cover flood damage. Those states are Texas, Mississippi, and of course, Florida.

Nationally, about 81% of homeowners can expect rate hikes, according to Redfin. However, the bulk of those will be in high-priced, Hispanic or white neighborhoods, even though the price rises themselves is “in every racial and income group.” Redfin’s analysis did not include rate changes for condos, townhomes, multifamily buildings, or commercial buildings like office spaces or manufacturing facilities.

“The cost increases are hitting flood-prone Texas and Florida at a time when both states are seeing their populations swell due to pandemic-driven migration,” Redfin said.

The mass migrations to Florida and Texas have added to the housing market stresses facing both states and shooting home values up during a shortage of inventory. While the shortage continued, mortgage rates are also on the rise, now at 5.11% for a fixed rate, 30-year-mortgage, according to federally-backed mortgage company Freddie Mac.

“Most policyholders probably won’t feel the burn of FEMA’s price hikes in year one, but by year five or 10, the elevated cost of flood insurance could impact where Americans decide to buy and build homes,” Redfin Senior Economist Sheharyar Bokhari said. “Some people may choose not to renew their flood insurance policies despite increasing flood risk due to climate change, especially as inflation drives prices up elsewhere in the economy as well.”

Heading into flood season, Redfin reports six states have more policyholders seeing rate increases than the rest of the U.S.

Those six states are Texas, with 89% facing price increases for premiums, and Florida at 88%, Mississippi at 87%, Alabama with 85%, West Virginia at 84%, and Louisiana at 83%.

Redfin said that in Texas, Louisiana, Mississippi and Florida, “homeowners have been paying less for flood-insurance than the typical U.S. policyholder.” With the change in premium rate calculation from Risk Rating 2.0, those premiums are now going up, potentially equalizing the rate levels across the country. Redfin said all of the states facing price increases are also expected to have higher flood risks in the future.

Here’s a breakdown of the data Redfin used to analyze cost changes from the NFIP update to Risk Rating 2.0.

Share of policyholders set to see premium increases starting April 1, 2022Share of policyholders set to see premium decreases starting Oct. 1, 2021Number of policyholders set to see premium increases starting April 1, 2022Number of policyholders set to see premium decreases starting Oct. 1, 2021Average NFIP premium (May 2020)
(Source: Redfin)

”Flooding isn’t top of mind for a lot of house hunters in Florida, despite it being a serious risk. That’s because they’re often weighing other factors like affordability.” Eric Auciello, a Redfin team manager in Tampa, said. “During the pandemic, many folks moved to Florida from expensive coastal cities like New York because they could work remotely and find more affordable homes.” Auciello said Florida homes are usually more resilient when it comes to surviving natural disasters than other areas.

An attempt in U.S. Congress from Florida lawmakers such as Sen. Marco Rubio (R-Fla.) and Rep. Mario Diaz-Balart (R-FL25) to delay rollout of Risk Rating 2.0 until September 2022 have not made headway, meaning Florida homeowners have started seeing their rates increase as early as April 1.

Florida’s rating profile under the new system can be found online here.